Lord Hunt of Kings Heath
To ask Her Majesty’s Government what is their estimate of the number and percentage of students who will pay back their student loans in full.
Viscount Younger of Leckie (Con)
My Lords, the Government estimate that, following the increase from £21,000 to £25,000 in the repayment threshold that applies to post-2012 student loans, 30% to 35% of borrowers with higher education loans and 40% to 45% of borrowers with advanced learner loans will repay their student loans in full. Of those starting courses in 2016-17, that would equate to 135,000 to 160,000 borrowers with higher education loans and 35,000 to 45,000 borrowers with advanced learner loans fully repaying their loans during their 30-year repayment period.
Lord Hunt of Kings Heath (Lab)
My Lords, I am grateful to the Minister. What he said was that the majority of students will never repay their loans in full. We also know that up to 45% of the total loan outlay will never be paid. The poorer students end up with the biggest debt. Last week, the National Audit Office said that two-thirds of students consider that universities do not provide value for money and that proper independent advice is not available to them when they make these decisions, which have such a large financial consequence for them. How can we have confidence in the forthcoming review when the Government resolutely and so determinedly defend the present wretched system? Will the Minister accept that the current system is failing and that we need a new system that is fair to students?
Viscount Younger of Leckie
The noble Lord raises a number of points, but we believe that the student loan system is working well. There is always room for improvement. We believe that students do get good advice before they take on loans; indeed, they have to sign some papers for that.
On some of the noble Lord’s more major points, we are very keen to pursue the value-for-money approach, and Jo Johnson in the other place has made it clear that universities must provide value for money for students. The House knows that the whole graduate student payment system is designed with a deliberate subsidy in place, and we are on track with a complicated formula to achieve that.
Viscount Brookeborough (CB)
My Lords, I think everybody would agree that personal loan management is very much down to financial education among students and graduates. Is the Minister aware that our report on financial exclusion—supported by the FCA report, Financial Lives—identifies that over 80% of all graduates complained that they have had little or no financial education? What are the Government going to do about that?
Viscount Younger of Leckie
When the Office for Students is up and running from January, that is one of the issues we will look at. It is very important that students get the best experience at universities, and are given the best advice. The noble Viscount makes a good point—that issue is equally important in giving them advice on financing their course costs.
Baroness Seccombe (Con)
My Lords, in 1947 my brother and my husband went up to Oxford to read law, and my brother became a High Court judge while my husband became senior partner of his practice. Those degrees were hard fought; they played sport in every section, and I hope that the Minister will agree with me that that was damn good value for money.
Viscount Younger of Leckie
My noble friend, who is referring to degrees that were shorter than today’s degrees, is right. That is one reason why this House was very keen to promote the idea of accelerated degrees, which we are consulting on, whereby they are undertaken in two years at less cost per year than they would cost in three years.
Lord Addington (LD)
My Lords, does the Minister not agree that degrees have become totally monetised and have a value attached to them? Would not it be a good idea to take a long, hard look at some form of graduate tax that would do away with the idea of one huge debt hanging over those who undertake a degree?
Viscount Younger of Leckie
The noble Lord is right that a graduate tax was considered as part of the reforms of several years ago. We do not think this is the right approach but we do think it right that students should be able to take out loans, which, I am sure the noble Lord will agree, further the aim of having more disadvantaged people at universities.
Lord Morris of Aberavon (Lab)
My Lords, can the Minister name any other government agency that charges 6.1% on loans?
Viscount Younger of Leckie
That is a question which I am not going to be drawn into answering. However, the interest rates are very much set and as I have said before, they are kept under constant review. A review of higher education funding will be forthcoming.
Lord Stirrup (CB)
My Lords, have the Government assessed whether there would be any material difference in the sums repaid to Her Majesty’s Treasury over the decades if the interest rates were set at a less usurious level?
Viscount Younger of Leckie
I am sure those figures have been drawn out but I do not have them with me. However, 98% of all borrowers who entered repayment in April 2015 or earlier have fully repaid or are meeting their repayment obligations. That is testament to the fact that the payment-at-source system, working closely with HMRC, is working well.